May 6, 2013

Pilgrim's Pride shows 37% rise in earnings

 

Pilgrim's Pride has unveiled a 37% rise in earnings and continued headway in cutting debts as it countered ideas of a loosening US poultry market.

 

The Colorado-based group, which Brazilian meat giant JBS bought out of bankruptcy late in 2009, reported earnings of US$54.6 million for the January-May period, equivalent to US$0.21 a share, and meeting Wall Street forecasts.

 

The improved result represented a fifth successive quarter in the black for the group, underpinning ideas of a turnaround following a clean sweep of losses in 2011, when the group was troubled by high grain prices and industry overcapacity, besides its own operational setbacks.

 

"We delivered better results over year despite US$141 million of increased feed ingredient costs," Bill Lovette, the Pilgrim's Pride chief executive, flagging boosts from diversifying its product mix and reducing staff turnover.

 

"We made significant steps on our strategy to strengthen our company and our balance sheet."

 

Net debt, while little changed on end-2012 levels, finished the quarter down 9.4% on-year at US$1.10 billion.

 

And the group flagged tightness ahead in US chicken supplies too, despite some indicators which many have pointed to ideas of a loosening market, with exports so far in 2013 running 3% below year-ago levels, and tumbling nearly 8% in February, thanks to weaker demand from Hong Kong and Taiwan.

 

Chicken kept in US cold storage in March was, at 617.9 million pounds 7.6% higher than a year before, with chicken wing inventories soaring 126% to 74.9 million pounds.

 

However, Pilgrim's Pride said that the comparison was with a "historically low" 2012 figure, and said that despite the increase, stocks were "still well below one week's worth of industry production".

 

On exports, the USDA was still "forecasting another strong year", of 7.2 billion pounds, which would rank second only to 2012's 7.3 billion pounds.

 

On supplies, the forecast rise of 1.7% to 51.8 million head in breeding hens for eggs for hatching still left the US flock at historically low levels, among the smallest since the mid-1990s, and well below the figure of 57.2 million head reached in 2007.

 

Pilgrim's Pride highlighted a turn negative, on-year, in the number of eggs set in incubators for hatching, after a firm start to the year.

 

Poultry market dynamics are closely watched by investors for signs of the market looseness which might undermine producers' ability to maintain meat prices, and leave them exposed to the elevated meat costs.

 

However, benchmark Georgia dock chicken prices are in fact above US$1.00 a kilogramme, more than 20% above the five-year average for the time of year. Pilgrim's Pride shares stood 5.1% higher at US$10.41 in afternoon deals in New York.